There is indeed a slowdown and govt does recognise it: Sanjeev Sanyal

Sanyal said the prevailing slowdown is demand-driven, which is a result of various factors, including higher real interest rates.

Factors like high-interest rates, current scenario of NBFCs, tightening credit conditions and slowing external demands are collectively responsible for a slowdown in the Indian economy, Sanjeev Sanyal, Principal Economic Advisor said in an interview with ET Now.

The comments come just two days before the government releases the Q2 GDP numbers for FY20.

Economists expect the Indian economy to slow down further. “We agree there has been a slowdown and the Finance Ministry has been pointing out the weakening demand conditions in its earlier reports. We have seen a quarter of slowdown and subsequent quarter will also suffer slowdown, but the target of making Indian a $5 trillion economy strongly stands,” he added.

He added that the weakening domestic demand and external factors like the global market slowdown and inverting yield curve point towards recessionary however, it is not as bad as the 2008 Lehman Crisis.

“I will be careful, the slowdown does not mean economic crisis. There is a global slowdown, but we cannot see this as an economic crisis yet,” he said.

While alluding to steps being taken by the government in sectors such as MSME, banks, NBFC and autos, the top advisor in North Block reiterated that more steps are in the offing to pump-prime the economy. “We are recognise the problem with the real estate sector, but it may not be unwound with fiscal support. We are trying to fix the problem, but financial support may not be enough to fix the issues,” he said.

Talking on the latest RBI’s decision of transferring Rs 1.76 lakh crore to the government, Sanyal said that the government is not raiding the RBI and the central bank is heavily capitalised with currency reserves.

“Let me assure that this is not raiding the reserves. The RBI is autonomous in its policies, but domestic currency reserves are very high. It gives some space to maneuver but we have a schedule of expenditure as mentioned in the budget. We can spend more or reduce deficit of borrowing as well. There are various permutations and combinations,” Sanyal added.

FM Nirmala Sitharaman also said in a press conference on Tuesday that it is very disappointing and “outlandish” that there have been questions arising on the credibility of the central bank.